Economies in Latin America Surge

 

 

   At the bottom of this article is a commentary by this site on how the "debt defaults, currency devaluations and the need for bailouts from rich countries" are all the result of predatory lending -- money pumped into the pockets of corrupt governments by U.S. and European governments, by the World Bank and other international lenders, and by U.S. and European corporations. From colonial times, through the cold War, and now in the era of "global free trade," loans have gone to the rich and military, who put it in their pocket and let the poor starve. All this corrupt debt should be cancelled. It was issued in a conscious act of bribery to to the rich elite in poor countries in order to exploit the poor, to exploit the gold and oil and fish and farmland, not to help the poor.

    But, in fact, I find it quite exciting if there is something to be optimistic about as the article suggests. I just don't like the smug tone as to Latin American economies, which have been playthings to Europe and the U.S. for centuries.    

 

 

Economies in Latin America Surge Forward

SIMON ROMERO
Published: Thursday, July 1, 2010 at 6:30 a.m.
Last Modified: Thursday, July 1, 2010 at 5:16 a.m.

( page all of 5 )

LIMA, Peru — While the United States and Europe fret over huge deficits and threats to a fragile recovery, this region has a surprise in store. Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, is experiencing robust economic growth that is the envy of its northern counterparts.


Moises Saman for The New York Times

The Plaza Norte shopping mall in Los Olivos, a district of Lima, where many poor migrants from the Peruvian highlands live.

By SIMON ROMERO
Published: June 30, 2010

Click to enlarge
The Plaza Norte shopping mall in Los Olivos, a district of Lima, where many poor migrants from the Peruvian highlands live.
Buy photo
Moises Saman for The New York Times

Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several Latin American economies that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts that the region’s economy will grow 4.5 percent this year.

Recent growth spurts around Latin America have surpassed the expectations of many governments themselves. Brazil, the region’s rising power, is leading the regional recovery from the downturn of 2009, growing 9 percent in the first quarter from the same period last year. Brazil’s central bank said Wednesday that growth for 2010 could reach 7.3 percent, the nation’s fastest expansion in 24 years.

After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States.

Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year.

“We’re witnessing what are probably the best economic conditions in Peru in my lifetime,” said Mario Zamora, 70, who owns six pharmacies in Los Olivos, a bustling working-class district of northern Lima where thousands of poor migrants from Peru’s highlands have settled.

Vibrancy mixes with grit around his pharmacies. A Domino’s Pizza vies for customers with Peruvian-Chinese restaurants called chifas. Motorcycle taxis deliver passengers to nightclubs. Competition, in the form of a newly arrived Chilean pharmacy chain, looms around the corner from his main store.

Los Olivos offers a glimpse into the growth lifting parts of Latin America out of poverty, but big exceptions persist. In Venezuela, electricity shortages and fears of expropriations caused gross domestic product to shrink 5.8 percent in the first quarter.

But Venezuela, and to a lesser extent Ecuador, another oil-dependent country that lags behind its neighbors in growth, seem to be exceptions to a broader trend.

Even small countries ideologically aligned with Venezuela have adopted pragmatic policies and are faring well. While Europe was gripped by fears of contagion from Greece’s debt crisis, the credit rating agency Standard & Poor’s upgraded Bolivia in May, citing its sound public finances.

Latin America’s growth largely reflects a deepening engagement with Asia, where China and other countries are also growing fast. China surpassed the United States last year as Brazil’s top trading partner, and is the second largest trading partner in countries like Venezuela and Colombia, Washington’s top ally in the region.

Some scholars of Latin America’s economic history of ups and downs say the robust recovery may be too good to last, pointing to volatile politics in some places, excessive reliance on commodity exports and the risks of sharply increasing trade with China.

Michael Pettis, a specialist at Peking University in Beijing on China’s financial links with developing countries, said the region was especially exposed to Chinese policies that had driven up global demand for commodities, including what appears to be Chinese stockpiling of commodities.

“Within China there is a ferocious debate over the sustainability of this investment-driven growth,” Mr. Pettis said. “I’m worried that too few policy makers in Latin America are aware of the debate and of the vulnerability this creates in Latin America.”

Other economists, including Nicolás Eyzaguirre, director of the Western Hemisphere department of the International Monetary Fund, suggest that low international interest rates, another factor supporting Latin America’s growth, will not last much longer. Even so, they applaud home-grown policies that are supporting growth.

Chile, for instance, saved revenues from copper exports when commodities prices climbed, allowing it to enact a stimulus plan last year and rebound from the February earthquake. Chile’s economy grew 8.2 percent in April from the previous month, its biggest increase since 1996.

“This time around, the positive shock is probably even better, since some countries saved at least part of their windfall from the good years,” Mr. Eyzaguirre said.

Within the fund itself, Latin America’s recovery is translating into new political sway, particularly for Brazil, which has paid its debt to the fund and is seeking to enhance its voting stake in it. As Brazil posts China-level growth, President Luiz Inácio Lula da Silva is nurturing soft-power ambitions, with ventures like a state television station that will broadcast to African nations.

David Rothkopf, a former Commerce Department official in the Clinton administration, pointed to the dozens of embassies and consulates that Mr. da Silva has opened around the world.

“Like other Latin American countries, Brazil needs to improve its infrastructure and train more engineers,” Mr. Rothkopf said, “but it embodies the rise of emerging powers, one of the great themes of this century.”

Peru, whose economic growth is expected to rival or outstrip Brazil’s over the next several years, exemplifies the challenges remaining in a sizzling economy.

The country boasts nimble companies like Ajegroup, founded during the chaos of the 1980s. Now the company’s soft drinks compete with giants like Coca-Cola, not just in Peru but in other Latin American countries as well.

Foreign investment has flowed into Peru, largely in mining. But this investment reveals both weaknesses and strengths. Mining accounts for about 8 percent of economic activity, but about half of tax revenues, creating problems if commodities prices fall, said Pedro Pablo Kuczynski, a former finance minister here.

Deep inequalities also persist, especially between the capital, Lima, and the Andean highlands and the forests of the Amazon basin, where factions of the Shining Path guerrilla group feed off the cocaine trade. As much as 70 percent of the labor force still works outside the tax system, depriving workers of benefits and the government of revenue.

But some of what glitters in Peru’s boom seems to be paving the way for lasting prosperity. Felipe Castillo, 60, mayor of Los Olivos, is investing tax proceeds in a new low-tuition municipal university for 4,000 students. He gazed recently at the 11-story structure, in a slum that has begun to take on the trappings of a lower-middle-class district.

“Maybe the students at this institution will look at the mistakes of our economic policy in the past as the tragic features of a bygone era,” Mr. Castillo said.

Stopdown editorial comment on the article above.

This New York Times article cites "debt defaults, currency devaluations, and the need for bailouts from rich nations" as if these hapless poor nations brought these debacles on with no help from the U.S. and Europe. The debt that was fed into these nations, as in the 80's by Bank of America and other U.S. banks, for decades by the World Bank, and the money pumped into terror regimes as in Guatemala and Salvadore inthe Cold War, has brought only ruin, mayhem and misery to the working people and small businesses of Latin America. The money that was loaned, generating the debt, was flushed down the toilet of corrupt, homicidal, but reliably anti-communist dictatorships that Eisenhower, Kennedy and ensuing presidents called the stewards of "the free world." (JFK's favorite lie-phrase.) U.S. should have supported human rights and democracy instead of military/mafia governments which exterminated peaceful leftists such as union organizers, calling them communists because they had the nerve to ask for freedom of speech. These state-terror regimes caused people to join anti-government, Soviet-supported guerilla armies just as our Middle East policies generate anti-U.S. militants and terrorists. (Click here for article about how the U.S. has been putting people with no reason to suspect of militancy in prison just to create a data base that will supposedly lead them to terrorists. The families have not been allowed to see prisoners. This is how we teach democracy? No, this is how we cause people to join insurgencies.) As a sequel to the horror of the Cold War, poor countries are now being held for ransom, accountable for debt that was incurred by state-terror governments that the U.S. should not have supported. Some of the debt goes back to colonial arrangements. World Bank has just financed control of small economies, wasting the money on corruption (which is still world bank unofficial policy, article, wsj). The debt  has not helped working people in any way, but now we dictate that governments not spend on education ot health care, which are important for their economies to develop. They are told not to subsidize their poor farmers by the U.S. and Europe, they must pay the debt, while U.S. and Europe dump subsidized agribusiness crops on these poor people, wiping out the small farmers.  (Under Clinton in the 90's in Haiti: their rice and pork farming was destroyed; this agricide was carried out under free trade terms Aristide had to accept for U.S. help in his reinstatement. The Haitian military/police regimes were always supported by the U.S. going back to Woodrow Wilson.) (A good book on the history of the U.S. in Latin America, going back to the founding fathers, try "Inevitable Revolutions"  by Walter LaFeber) (For an article on how Malawi spurned the World Bank and  helped small farmers get fertilizer they needed, with excellent results, click here.)

    The point is that these debt situations and bail outs come out of economies the U.S. and Europe have been manipulating and exploiting, going back to colonial times, all during the Cold War, and now in the "free trade" era which means freedom for Western Corporations to plunder the slave-wage labor, fish stocks, oil, gold, diamonds (although now we've become quite pious about diamonds, so it seems) and anything else they can extract in their blood sucking ways that we call free enterprise.  It is an often-cited irony that third world countries with a lot of natural resources, like Nigeria with its oil, are among the poorest. The corruption that sucks up the money that issues from oil is part of the policy of Western corporations corporations, like Shell in Nigeria, destroying the habitiat of people in the oil rich Niger Delta, while paying the kleptocrats in Lagos, all the while preaching about free enterprise. Shell doesn't want democracy, in a democracy labor has rights and unions will form, environmental protections will matter. Can't have that. 

   We pay off and indemnify the governments and then exploit, denying people an economy of homegrown businesses. Then we stand around and admire our own generosity when we forgive some debt. If Latin America is doing better it is in spite of, not because of U.S. and European loans and programs.